SYDNEY/WELLINGTON: The Australian and New Zealand dollars struggled to make any headway on Friday after attempts to hold above key levels proved fruitless, though they were on track to end the week with solid gains.
The Aussie eased to $0.9173, from $0.9180 in early trade, but was still well above a three-year trough of $0.8998 plumbed last week. It looked on track to post a gain of 1.3 percent for the week, the largest in four months.
It climbed to a one-week high of $0.9292 on Wednesday before investors opted to book profits and took it back below important support at 92 cents.
Also capping the Aussie were growing expectations of further monetary easing by the Reserve Bank of Australia (RBA) to stimulate a slowing economy.
Swap markets now see a 62 percent chance of a cut in August, from a 48 percent chance earlier in the week, while interbank futures have a 25 basis point cash rate cut to 2.5 percent by October fully priced in.
The Aussie dollar's next focus point is inflation data on July 24. Forecasts centre on a reading below the mid-point of the central bank's 2 percent to 3 percent target range.
"Markets expect a dovish outcome so if there is any surprise, it's likely to be on the upside which would be Aussie-supportive," said David Scutt, a trader at Arab Bank Australia.
That could send the Aussie as high as 94 cents before it would again be sold, he added.
Immediate resistance was seen around $0.9190 with support at $0.9113, the 61.8 percent retracement of the $0.8998/$0.9292 rally.
The Aussie has lost 12 percent so far this year, partly on concerns about growth in China, Australia's key export partner, and talk of tapering stimulus in the United States.
In New Zealand, the kiwi dollar was marking time around $0.7895/00 and set to post a gain of 1.5 percent for the week.
The currency briefly dipped after a magnitude 5.7 earthquake shook the centre of the country, including the capital, Wellington, but recovered on confirmation there were no casualties or damage.
It was unmoved by data showing the net gain of migrants in June was its highest in four years, pointing to a growing source of domestic demand that will add to growth.
Near-term support for the kiwi was seen at $0.7850, close to the 10-day-moving average, and resistance initially at the overnight high of $0.7913, ahead of $0.7950.
The Reserve Bank of New Zealand's (RBNZ) is expected to hold the cash rate at 2.5 percent at its July 25 policy review, and keep it there to the end of the year.
However, an improving economy, including a hot housing market and a quickening pace of rebuilding after a major earthquake in 2011, pose a challenge to the central bank.
"We are already of the view that the RBNZ 'should' lift the cash rate by year-end due to these mounting housing pressures," said TD Securities head of research Annette Beacher.
Assuming no action this year, she said the RBNZ might have to be more aggressive in 2014 with 100 basis points of rate rises, against current market expectations of 45 basis points.
"The NZ dollar remains our favourite currency even though the RBNZ is determined to delay tightening for now. It merely delays the inevitable," Beacher said.
New Zealand government bond prices eased a shade, sending yields 1.5 basis points higher along the curve.
Australian government bond futures eased with the three-year bond futures 0.02 points lower to 97.280, while the 10-year contract lost 0.035 points to 96.295.
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